Engine of growth or laggard?

For every theory of a nation’s economic success or failure, there is an equal and opposite idea standing strong.

Has India lagged behind South Korea because it did not embrace the market? Or is it because the state-driven model it chose during the critical years between the early 1960s and late 1980s focused inward rather than on export-led growth?

If you find these questions irrelevant, hold your verdict.

If South Korea, which won independence exactly two years before India, is a model of economic success, do remember that until the 1960s, it was as developed as sub-Saharan Africa. Today’s basket case North Korea was more industrialised than its southern cousin.

“(South Korea) required a government that was single-mindedly focused on economic growth,” writes Dani Rodrik in his incisive book The Globalisation Paradox. It needed to grow “so it could counter any possible threats from North Korea”.

If problems are opportunities, India has no dearth of geopolitical issues (China, Pakistan) or internal ones (Maoists). Now bring ideas and the goal of becoming a developed nation together and what do you get? A state crying for growth but whose politics is failing its economics.

As we debate endlessly, countries like Indonesia, which became independent on August 17, 1945 and Malaysia (August 31, 1957) have become aspirational for India, setting in stark relief the failure of our long-term economic policy.

The problem of taking growth by the horns and turning it into a political idea is a psychological rather than an economic challenge. While there is little doubt that poverty has fallen in India, what is more visible are the mansions of the super rich whose incomes have grown faster, contributing to increased inequality, former chief economic advisor Kaushik Basu has said.

If any political party can coin a slogan like “Mera Bharat, Ameer Bharat” (my India, wealthy India) – and give it all it has, it may still help India jump to prosperity.

“We have become complacent,” says economist Bibek Debroy. “We should become an upper middle income nation around 2030.”

The 6% GDP growth rate that the government says is good because other countries are growing at a much slower pace works for a quarter or two. But if the line of sight is on 2030, a 6% growth means our per capital income would be $3,000, while a 9% growth will deliver $5,000, a number where China stands today and which Indonesia could reach in five years.